Right Back Where We Were Before
It’s Friday desk clearing time for this blogger. “Texas, known for its open spaces and cheap property, is experiencing the types of real estate bidding frenzies seen in tightly built markets from New York to San Francisco. Institutional investors may be playing a part in shrinking inventories and driving up prices near Dallas and Houston, said Sam Khater, deputy chief economist at CoreLogic. Companies that are trying to build a national business of renting out single-family houses have already fueled price increases in Arizona and Atlanta, and are moving into other lower-cost markets such as Texas, he said.”
“Texas’s surge in prices ‘begins to defy the fundamentals,’ Khater said. ‘Those forces don’t shift that fast. The only factor it can be that can move things that much is an investment-type mentality driven by investors.’”
“In metro Phoenix, the market share of luxury homes, or those priced in the millions of dollars, rose to 21 percent from 15 percent in the year ending in August, according to an analysis by Mike Orr, at the W. P. Carey School of Business at Arizona State University. Meantime, the market share for the lowest-priced homes, or those priced under $150,000, fell to 14 percent from 25 percent. Anthony Salcito, a luxury-home developer in Scottsdale, said he went through the recession building one or two houses a year to sell for between $2 million and $3 million.”
“He is currently working on five homes in that price range, ‘right back where we were before the crash,’ he said.”
“With the growth picking up pace, predictions about the property market’s future trajectory have become even more polarized. ‘If the past 10 years can be hailed as ‘the Golden Decade’ of China’s property market, what follows will be ‘the Platinum Decade’,’ says Zhou Xin, chair of the Shanghai-based E-house China, a leading real estate service provider. Dong Fan, a professor from Beijing Normal University, adds that ‘it’s not difficult to foresee that houses in Beijing will reach over 800,000 yuan (130,000 U.S. dollars) per square meter 25 years from now.’”
“Corresponding to their optimism are warnings from other pundits that buyers should act with caution as the bubble-prone property market has accumulated many risks. ‘The growth momentum in first- and second-tier cities highly resembles the 1980s property market in Japan, whose housing bubble finally burst. We should be more cautious,’ warns Wang Shi, chair of Vanke, China’s largest residential developer.”
“The British know a thing or two about housing bubbles but still propagated a bubble in 2007 which peaked at 5.7 times income, with the subsequent crash once again exposing the weakness in the banking system. Have we learned? It would appear not! The current price to income ratio is 4.6, just shy of the late 80s peak and a worrying starting point for the traditional UK housing-led economic recovery, fed this time by mis-timed government incentives in the form of ‘Help to Buy’.”
“Aside from the fact that housing overvaluation effectively transfers wealth from the young to the property-owning old, when the obligation for government debt is going the other way, the housing market is being held aloft on the expectation that prices will rise indefinitely. It is an exemplary demonstration, as only the UK housing market knows, of the ‘greater fool theory’ of asset pricing: someone will always give you more than you paid.”
“Colin James’ article alluded to a potential problem in his last paragraph, ‘in any case , debt cannot go on rising forever. the circus will stop. At least houses are safe. Or are they? What’s your exit strategy?’ He clearly believes that debt offerings will diminish and interest rates will rise, meaning that invariably house prices will fall in New Zealand as they have in the USA after a ‘housing bubble’ caused by easy debt.”
“The indecent haste with which Aucklanders are panicking about required deposits for houses and the huge boom in housing prices, coupled with money printing, suggests a crash of major proportions. You should either downsize or pay off your debt quickly, the writing is not only on the wall, but on the floor and ceiling too.”
“Mortgage brokers, realtors and developers have seen a surge the last few months in people who bought pre-construction condos two to three years ago ’scrambling’ to get financing to close deals. Some have had to walk away from deposits worth tens of thousands of dollars. Others have been forced to borrow from family — or against their principal residence — to come up with final payments on condos that lenders are no longer keen to finance, according to interviews with a number of players in Toronto’s condo industry.”
“Financial analys Ben Rabidoux believes these are just the first ‘cracks’ in Toronto’s housing market and could worsen next year when a record number of new condos — estimates range from about 20,000 to almost 43,000 depending on construction bottlenecks — are expected to be completed. ‘An estimated 85 per cent of condo units under construction in Toronto have been sold, but they’ve not (all) been sold to end users, and buyers have not yet been financed,’ Rabidoux says in a recent note to investor clients. ‘Therein lies the problem.’”
“The housing market’s rebound slowed in September, with King County home sales sliding 14 percent and the median price dipping 2.3 percent from the prior month. Single-family home prices in King County saw a remarkable run from January to July, when the median price hit $434,000, a 24 percent increase in just seven months. ‘That’s way too fast. That’s a 2006 market,’ said Dick Beeson, principal managing broker at RE/MAX Professionals in Tacoma.”
“For more than five years, Jim Redgate has been living next door to a zombie. During the summer, the stench of rot and neglect forces his family to close the windows of their Harnett County home. In the winter, the odor is replaced with hordes of roaches looking for a warm place to live. Redgate isn’t alone. In the Cape Fear region, dozens of abandoned properties, known as ‘zombie titles,’ rot in limbo as mortgage companies pursue owners to care for their vacant house.”
“If loan companies don’t think a property will find a buyer at a suitable price, they may leave it in limbo as they work through more promising inventory. Counties end up with homes that don’t produce property taxes, and neighbors end up living with abandoned homes next door that can’t be resold because they’ve never technically been foreclosed. ‘Basically, if they don’t think they can get what they want for the property, they’ll just let it rot,’ Redgate said.”
“On August 22 Olivér Hendricks was evicted from his home of 18 years after a contentious foreclosure battle that lasted more than three years and went all the way to the Massachusetts supreme court. Similar to countless cases across the U.S., Hendricks lost his job and had too much debt, which lead to his foreclosure and eviction. In 1996, Hendricks bought his home for $132,000. He refinanced twice, which doubled his mortgage to $265,000. ‘My situation is that I lost my job,’ he said. ‘I’m an iron worker and when your contract you go from here to there, and what happened is the economy tanked, and so nobody’s building anymore, and we depend on building.’”
“Underwater mortgages are still a problem that a lot of people face. In Massachusetts, in July and August, there was an uptick in foreclosure filings from the month before.”
“Janet Yellen, whom President Barack Obama is poised to pick to lead the Federal Reserve, is likely to keep the US central bank on the track mapped out by Ben Bernanke. She has spent more than a dozen years altogether at the Fed, starting as an economist, in the 1990s doing three years on the board of governors, and from 2004-2010 as head of the Fed’s San Francisco branch. Since 2010 she has sat next to Bernanke as vice chair of the Fed, and also serves on the policy-setting Federal Open Market Committee (FOMC).”
“At the time she was elevated to Bernanke’s deputy in 2010, she was assailed for not having forseen the economic crisis that hit the region under her watch at the San Francisco Fed especially hard. While in 2007 she had warned of possible recession, she candidly admitted, in testimony to a congressional committee in 2010, that she didn’t anticipate how bad things could get. ‘For my own part, I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system… I didn’t see any of that coming until it happened.’”
I wonder if Canadian Stealtors are as corrupt as US Stealtors……
Yellin…. ‘For my own part, I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system… I didn’t see any of that coming until it happened.’
If only she had been blogging here in 2006, she could have seen it all: Securitization fraud, mortgage fraud, UHSP fraud, Borrower fraud……it was all highlighted time and time again, just Yellin’ for attention.
“I didn’t see any of that coming until it happened.”
We desperately need this person to to be in control of the nation’s money supply.
“Our competitive advantage of relatively low housing costs is going to shrink,” Gaines said. “We’re going down the same path as California and Florida if we don’t think of some way not to do it. You can sort of see it coming.”
But evidently lots of people don’t even now. It’s only been five years! I was amazed that we had a second bubble in the Northeast just 15 years after the first one burst.
Gaines is probably the most quoted RE economist in Texas. ‘if we don’t think of some way not to do it’
It’s hard to get the genie back in the bottle. The usual ointment is ‘build more houses’, which doesn’t stop a mania.
It’s kinda funny how a Bloomberg article makes it look like this just sprang up from nowhere. Jeebus, Dallas prices are at all time highs, and Austin probably is too. Houston has been in a frenzy for over a year. Once again, these bidding wars and people buying a house while driving by (see the story) are symptoms. People see these things and join in. It doesn’t help that “institutional investors” have joined in, but they didn’t start this bubble in Texas. It’s been there for over a decade.
It hasn’t been that long since I posted stories of Californians buying up houses in Marfa TX.
Apparently she has successfully memorized the central banker’s motto (”Nobody could have seen it coming”).
Before my grandpa died (on mom’s side), I remember him discussing with me the potential benefits and drawbacks of securitization. Spreading the risks around on society. Insurance swaps. Taking the burden off the shoulders of the individual, and placing that burden on the shoulders of society. He said he didn’t know if it was a good thing or not.
That was a loooooooooong time ago. I was in elementary school. How could anyone have not though about this?
Two grandparent comments by me in one day. Weird.
“That was a loooooooooong time ago.”
Securitization has evolved from its tentative beginnings in the late 1970s to an estimated outstanding $10.24 trillion in the United States and $2.25 trillion in Europe as of the 2nd quarter of 2008. –wiki
‘a professor from Beijing Normal University, adds that ‘it’s not difficult to foresee that houses in Beijing will reach over 800,000 yuan (130,000 U.S. dollars) per square meter 25 years from now.’
When I read this, it took me back to the oil boom days in the 80’s. When oil hit it’s peak, I remember almost everybody I asked thought it would more than double from there.
I detect a little bias creeping into his scholarly analysis- I wonder just how many apartments he owns that he feels compelled to pump expectations like that? Baseless speculation- the international language of shills.
Reminds me of stuff that was said in the USA around 2005 about how kids living with their parents until 40 in order to pay millions for a house would be normal soon.
I remember reading “Funny Money” about Penn Square.
Those wild and crazy southwesterns and too big to fail bank! Can’t happen here, I thought.
It’s been the same movie over and over.
From the Amazon.com review.
“From esteemed New Yorker writer Mark Singer comes this cautionary tale of the Penn Square Bank, the oil and gas broker in an Oklahoma City shopping mall whose collapse in 1982 staggered America’s banking industry. Recounting the whole spectacular story and its colorful characters, Singer makes brilliantly (and hilariously) clear what actually happened and why it had to happen in boom-time Oklahoma. Nowhere else did money flow in quite the same spontaneous fashion.”
How come nobody was cautioned?
The crash in China will be epic.
It may lead to a change of government.
It may lead to a change of government.
Careful what you wish for, your wish could come true.
Further, it may prove the theory that the U.S. economy is decoupled from China’s to be false.
Colorado:
What do you think 1zucchini is whishing for, and why do think he should be careful about it?
That if there is a new government in China that we might find ourselves living during “interesting times”
Colorado:
Are you saying that any change in the Chinese government would hurt Americans?
One Square Meter = 10.79 Square Feet. $130,000 for 10.79 Square Feet. Wow, that is $12,048/SF.
Housing Analyst, will you please tell us what it costs to build housing in Bejing?
Why don’t you just tell us what you paid for YOUR investment properties in Beijing and Shanghai, mogul? You bought at the ‘bottom’- right?
I only bought real estate I could drive by on the way to work….one of my cardinal rules.
You bought a depreciating shack.
Yes I did. But they seem to be appreciating in value.
I paid about $80/SF for all them on average and I am going to move them to Bejing, where they will be worth $12,000/SF —- or about $36,000,000 for a 3,000 SF house. Seems like it would be worth the effort to ship them over there!
Nothing wrong with that…..except reality! I can’t imagine the article or professor is quoted correctly…..because that price point is absurd. Even Housing Analyst will agree with that statement….
Houses don’t appreciate.
I already gave you 100,000 examples last month that prove you wrong. In fact, I passed 1,000 of them to Ben as acknowledgement of his work over the last 8 years.
You haven’t demonstrated anything other than you’re consistently untrustworthy and deceptive.
Houses depreciate. They always have and always will.
HA
Some of us have made $ (net) on homes. That’s the objective in your subjective.
Last home we sold we made us 100’s of $1,000’s (net). Those were the days my friend. Going forward the risk is an unknown, I’ll give you that.
You only “made” money using liar math.
Now;
Is Leslie Appleton Young a liar?
Nope, cold hard cash, dear. Paid the bank back their $, the ransom of the REIC, and had no repairs (bought new). No liar math, HA.
99% of the REIC have a false sense of thruthiness. Next revelation HA?
dumb.borrowed.money
Is leslie appleton young a liar? Quit running.
Here’s a housing bubble redo:
‘Bolstered by the housing recovery, a growing number of homeowners are going it alone when selling their homes hoping to save thousands of dollars in commissions. The hot housing market in Cambridge, Mass., gave Jon LaRosa the confidence to sell his condo on his own. So in late May, the 34-year-old freelance IT worker listed it for $429,000 on ForSaleByOwner.com and scheduled an open house for the weekend.’
In the next week or so, more than 100 people came to see the place. LaRosa received seven offers and sold for $450,000, closing the deal by mid-July.’
‘Sellers say they also go it alone because they want more control of the deal. Tara and Brent Anderson didn’t want to rush the sale of their three-bedroom Dallas home, which they listed for $500,000.’
“Real estate agents are willing to take a lower price to make a quick sale, but that would cost me a lot of money,” said Tara. “We’ve priced it fairly and we’re not super motivated to sell. We’ll negotiate, but we don’t want to compromise much on price.”
500k for a house in Dallas.
‘The number of finished new homes available in North Texas has dropped to a 20-year low. There were only 2,423 completed, empty new houses in the Dallas-Fort Worth area in the third quarter, according to a new report by Metrostudy Inc. “Based on the job growth and population growth for the region, we would expect to see closer to 5,000 finished vacant homes,” Metrostudy’s David Brown said.’
‘Continued strong home sales and a constrained supply of houses have reduced the number of properties in inventory, according to the housing analysts’ third-quarter report. Builders in the D-FW area are still recovering from the recession, which cut home production by more than 70 percent. “It is likely homebuilders will start 22,000 homes in 2013, which is the most new-home starts since 2007,” Brown said.’
‘only 2,423 completed, empty new houses’
They never learn down there.
It’s amazing how quick this cycle has gone from bust to boom. Has it ever before happened this fast in the entire history of the modern U.S. real estate market?
The bounce off the bottom certainly appears much more rapid than it was off the bottom in the 90’s or 80’s or 70’s (when looking at Shiller’s long-term graph)…entire history is harder to say–immediately post WWII looked pretty steep too, but there were clearly other things at play at that point…
A Las Vegas story:
‘EDITORIAL: Jobs still missing from housing recovery’
Wanna see a high production (zowie helicopter shots accompanied with uplifting “you know you want to buy it” music) video selling a development of 10,000 plus homes that was going to bring riches to a small SoUtah town?
http://www.youtube.com/watch?NR=1&v=Rz4ASDjPSJU&feature=e
Unfortunately, they only got 1 house.
https://www.youtube.com/watch?v=RZK-kBIxPek&feature=player_embedded
Nourish Life, indeed!
Spectacular canyon-scapes don’t pay the bills. We once stopped for the night at Hurricane, UT (the small UT town in question). Other than the motels, gas stations and fast food joints, I can’t imagine what anyone did for a living there, except perhaps work for the government.
I have a brother in law that grew up there but I have no idea what his family does. Now he’s an MBA accountant that works as a realtor in Texas…
“Hurricane, UT”
Pronounced ‘Hurrikin’ in case you aren’t a Utahn.
“Spectacular canyon-scapes don’t pay the bills.”
When you can no longer pay your mortgage that film clip is the Utah version of what you see and hear when you’ve decided to call it quits, a la “Sol goes home in Soylent Green.”
“Spectacular canyon-scapes don’t pay the bills.”
Here’s the sequel…poof!
http://www.youtube.com/watch?v=RZK-kBIxPek
The bounce off the bottom certainly appears much more rapid than it was off the bottom in the 90’s or 80’s or 70’s
Because it wasn’t a bottom…it was a baseball bat swung by a big leaguer on roids…
Thank you for catching that one Carl.
“It’s amazing how quick this cycle has gone from bust to boom.”
When something that has been steadily “gamed-up” experiences a sudden steep uptick it is usually a sign that the nervous top hats are at the exits behind their confused and hurried petticoats.
500k for a house in Dallas.
And I thought Denver was pricey.
That’s almost 3X the median home price in city of Dallas proper. Of course there are $500k houses in Dallas because there are plenty of financiers, doctors, and lawyers, but that’s not price that anyone is required to pay, and that’s the difference.
But everybody is moving to Texas to do business!!
Now, if we can figure out how a pair of $12/hour “Lucky Ducks” can swing the mortgage on a $500K house.
Or get some of those overpaid Federal employees transferred.
‘That’s almost 3X the median home price in city of Dallas proper’
It’s hard to know about this because a lot of suburbs get lumped in with “Dallas”. I haven’t been there for 3 years, but I can’t imagine wanting to live in the actual city of Dallas. Yes, I know there’s a lot of condos that appeal to bar flies. I wonder what they are getting for that stuff down by Deep Ellum or West End?
The desirable areas that are actually city of Dallas proper are around White Rock Lake, north of but close to downtown, and far north Dallas next to Plano/Richardson/whatever other suburbs. Even then, the median home price in those areas isn’t $500k unless you have a special lot. It’s still more like $250k.
There are small enclaves called Highland Park and University Park where the wealthy people live (most expensive house for sale $120mm by all-around scumbag Tom Hicks) next to G Dub’s house, and they are sort of like small islands in the ocean of Dallas, and not city of Dallas proper.
Outside of the 3 nice areas I mentioned, I’d bet the median home price in the rest of the city of Dallas is below $100k.
Lots of the old apartments in Deep Ellum and the West End are being torn down (getting rid of low income people - they are sent to cities south of Dallas downtown) and turned into midrise apartments that rent starting around $750-$1000 a month.
It’s hard to know about this because a lot of suburbs get lumped in with “Dallas”
My sister lives in some far flung Dallas suburb, and I know it’s much cheaper there. I assumed that a 500K, 3 bedroom house was in a centric, desireable nabe.
You can get cheaper housing in the metro Denver area, you just need to live in the less desirable areas, like Aurora, or in certain exurbs like Brighton. But If you want to live in places like Boulder, Broomfield, Lousiville, Washington Park or Highlands Ranch, then it’s gonna cost you pilgrim.
I suppose that’s true too, but it depends on your definition of ‘desirable’.
For example, Plano East is a good public high school in Plano (north of Dallas suburb) where the average home price is about $100k and there are lots of hispanics, but the top students (usually upper class white or Asian, the place isn’t magical) attend Ivy League schools most years unlike Dallas schools which are generally terrible and the top students (same class white and Asian) go to state schools. Is it a desirable area in terms of ‘wealthy people live there and there are no minorities’? No, but it has good schools, is not dangerous, and is close to stuff, not off in BFE.
So houses are not uniformly expensive even in what would generally be considered desirable areas.
The desirable part of Plano (just using the same city as an example) is 8 miles away to the west, and is dominated by high earning whites and Asians and what the average person would be more likely to consider a ‘desirable area’ just by looking at it, and houses are much more expensive.
Some of the comments in the first article about lying stealtors are spot on.
‘Lenders see some crazy excuses for dings on credit reports’
‘Mortgage seekers have told lenders such things as ‘I was married to the devil’ and that they had a restaurant venture with a 9-year-old that failed. One said she was ‘guaranteed’ to win the lottery.’
I applied for a couple jobs in the Dallas area. They were all very low-paying, but the rents around town were low enough to compensate. If people are paying that kind of money to buy houses around there, then people are ruining themselves financially.
One also must consider the culture in Texas. There was one potential “supervisor” who had a percentage of typing errors that would be acceptable in the candidate’s work. According the job listing, if you exceeded the error threshold, you would be immediately terminted. K, I’m not a typist, and that’s not a good way to manage a team. Why would anyone want to pay a lot of money to live in that environment?
I applied for a couple jobs in the Dallas area. They were all very low-paying
In other words, a typical American job.
‘Some have had to walk away from deposits worth tens of thousands of dollars. Others have been forced to borrow from family — or against their principal residence — to come up with final payments on condos that lenders are no longer keen to finance’
There’s some funny stuff in this article.
My sister, the wanna-be real estate mogul, is finding the North Dallas market a lot tougher recently.
She’s been bugging my mom about moving to DFW for several years. Finally convinced her to sell her place and move a few months ago. THE Plan was for sis to buy a rental property, then rent it out to mom, my brother, and his significant other.
The plan isn’t looking so hot right now. Mom can’t sell her condo (I’m not giving it away…..”), so she’s started unpacking. The flippers/investors have driven up prices in the Metroplex. And she can’t get a mortgage; prices too high, nobody’s making enough income. (My brother and mom were going to be “partners”).
Next step will be “Why don’t you move in with me until we find something to buy?”…… Evidently, plans are afoot to convert part of the house into another bedroom.
Your sister just wants your mom and brother to pay her the rent money. Why doesn’t she get tenants on the market, rather than sucking her relatives into this?
When my grandpa died on my dad’s side, my grandma moved in to her daughter’s house. She did not pay rent. She gave money to help cover her food, electricity, etc.
“…..just wants your mom/brother to pay her…….”
Exactly. But she thinks us dumazz rubes are all too stupid to figure this out.
She has a bad case of “Administrative Assistant Complex”.
(A malady seen in many AAs/glorified secreteries working for upper level managers/executives, in which case the perceived intelligence/judgement/business acumen/power of the people they work for is transferred to them by social osmosis)
I just want to point out that inventory is up just about everywhere. This has been going on long enough now to start showing up in the year-over-year numbers. Prices have been going down for only a few months, but not long enough to show up in the year-over-year numbers yet. Most pointedly, prices began to decline in spring or summer, depending on the city you’re looking at. That is unseasonal (as if the housing bubble obeyed seasonal trends).
‘I’m Jeremy Hobson, broadcasting today from HERE AND NOW contributing station KJZZ in Phoenix, Arizona.’
HOBSON: One Galleria homeowner who can’t sell right now is Michael Johnston. His kids have left the nest, and he and his wife no longer need their five-bedroom house. It did what all houses did here. It skyrocketed in value during the boom.
MICHAEL JOHNSTON: Oh, yes. It was up to about 475 when - at its peak.
HOBSON: And now today it would be worth, what?
JOHNSTON: Three hundred and 10.
HOBSON: So what number are you waiting for?
JOHNSTON: I’m probably waiting for somewhere around 360, 365.
HOBSON: And how long do you think you’re going to have to wait for that?
JOHNSTON: In my projections, it’s probably going to be about a year and a half to two years.
HOBSON: How tied are you, do you feel like, to the state of the national economy?
JOHNSTON: I think that for the most part, I don’t feel particularly tied. However, with the current things that are going on in the government, a misstep by them could throw the whole economy back into a tailspin, and the value of our homes could drop to where I’m living in this home for a lot longer than I anticipated.
HOBSON: You’re talking about certainly the government shutdown right now.
JOHNSTON: I’m talking about the government shutdown, their ability to face the debt crisis, their ability - their inability to act. And it’s causing a great deal of turmoil in the local economy and business owners. And that drives our economy here in Arizona.
HOBSON: Back in the car, realtor Randy Courtney takes me to another housing development, this one filled with higher-end homes. It’s called Toscana. Randy points at a home on the left.
COURTNEY: That had an appraisal back in ‘07 of - just shy of 1.2. We sold it for 540.
HOBSON: Wow, from $1.2 million to $540,000. So less than half.
COURTNEY: Correct.
HOBSON: What’s it worth now?
COURTNEY: Now that same home is worth about 750 to 780.
HOBSON: So it’s come back about 50 percent from the low.
COURTNEY: That is correct.
HOBSON: Does it feel like you’re in a boom or even the beginning of a bubble right now, the way that - now that we look back with 20/20 hindsight, we see that obviously there was a bubble going on before.
COURTNEY: You know, I think what we’re seeing is a result of demand for our area continuing to improve. We’re seeing more stable and an equity-driven recovery. Arizona, of course, and the Phoenix metro area is a destination state. So we are blessed with just the tip of the iceberg for the baby boomers retiring and coming out here to find their dream home or retirement home. We have, you know, companies coming out of California. Of course, you know, with California taxes being 53 percent, they can come here and do business.
HOBSON: But these are exactly the same kinds of things that you probably would have been saying six, seven years ago.
COURTNEY: That’s correct. But I think what you’ll find today is that people are actually having to put down payments down. They are - and they’re not buying homes just as speculative as they were. So we’re finding a more balanced market. We’re finding people that want to stay in their homes not just to stay in them just for a year or two to flip.’
Oh man, this is going to be fun:
‘But these are exactly the same kinds of things that you probably would have been saying six, seven years ago…That’s correct.’
‘But these are exactly the same kinds of things that you probably would have been saying six, seven years ago…That’s correct.’
When your livelihood depends on not seeing the obvious … you don’t.
Prices in Phoenix have been declining for a few months. Inventory has been going up for almost a year.
“Phoenix…..destination state.”
ROTFLMAO……….
Arizona is to California as South Carolina is to Michigan.
PHOENIX Is a transition city people come and go
Arizona I don’t know ? It maybe a destination state ?
“We have, you know, companies coming out of California. Of course, you know, with California taxes being 53 percent, they can come here and do business.”
I think they go to Texas and if that works they shift as much as they can to Asia.
California taxes are not 53%. Where do people come up with this trash?
Geronimo!!!
‘Las Vegas homeowners are getting greedy. With real estate prices soaring, many local residents are hoping to cash in and sell their homes for big dollars, in many cases more than they are worth.’
‘Homeowners should dial down their excitement, though. Buyers increasingly are ignoring overpriced listings while homeowners who figured they’d sell to investors or others willing to pay anything are discovering that nobody’s biting.’
‘Last month, the valley had 6,330 single-family homes for sale without any offers on them. That’s up 13 percent from August and 61 percent from a year ago, according to the Greater Las Vegas Association of Realtors. The number of listings without offers has climbed every month since April, when there were 3,161 such houses on the market.’
‘Wall Street investors had been buying cheap homes in bulk to turn into rentals but now are paring down on local purchases because of the rising prices they helped create.’
‘Earlier this year, listings often received a dozen or more bids, many submitted sight unseen by investors. That frenzy has all but stopped, real estate agents say. Listings now get only a few offers, making it tougher for homeowners to find someone who’s willing to pay top dollar for a house.’
‘The median price of previously owned single-family homes sold last month was $180,000, down 1 percent from August but up 29 percent from September 2012, according to the GLVAR. Last month was the first in almost two years in which prices fell, and September was the first month since February that the year-to-year price increase dipped below 30 percent.’
‘Analysts said the region’s soaring prices were bound to taper off. No city can sustain a skyrocketing market forever, especially Las Vegas, which still has a sluggish economy and, as of July, a 9.7 percent unemployment rate. “You can only stay hot for so long,” RCG Economics principal John Restrepo said.’
What did that San Diego article say, “recently booming”?
‘Earlier this year, listings often received a dozen or more bids, many submitted sight unseen by investors. That frenzy has all but stopped’
‘Las Vegas housing recovery stalls after 19 months’
LAS VEGAS REVIEW-JOURNAL
‘I would say a lot of the cash investors are running out of cash to invest,’ said Gregory Smith, a Realtor in North Las Vegas. ‘And it is still really difficult to get a loan even if you are qualified.’
‘We knew these rising home prices had to slow down sometime,’ said Dave Tina, president of the Greater Las Vegas Association of Realtors. Tina said a reduction in hedge fund buyers is a good sign for the real estate market because it will result in more availability for owner-occupiers to afford a home. “It can’t go on forever, or we would have that bubble all the naysayers want to say we have.”
Ha ha HA!
‘Run of rising Las Vegas home prices reaches an end’
From the comments:
‘Inventory up and I have seen builders offering more incentives. I predict that since we do not have strong employment in the valley and wages are low, the prices of homes are now too high for the average buyer. Also, loans are harder to get, and with interest rates on the rise, hedge funds will soon, if not already start to look else where. I have followed some RE Agents blogs and based on this info, they are predicting a 20% drop next year… I can see it coming.’
It’s true, down we go. Since October 1, the Zillow estimate (fwiw) on my Vegas rental ticks downward every two days, in larger amounts each time. Refin’s home estimate suddenly stopped working for me, even with Flash enabled.
It may be time to think about the possibility that there is no fixing the residential housing market.
Too many people don’t know how to make a living any other way than to inflate prices, write garbage mortgages, and nail together crapshacks.
IOW, “When all you have is a hammer, everything looks like a nail”
Too many governments depend on personal property taxes staying high.
Too many still think/have been brainwashed into thinking “housing is an investment”. (If the house you are buying comes with farmland/pastureland, maybe. But the typical Starter Castle?)
Too many people don’t know how to make a living any other way than to inflate prices, write garbage mortgages, and nail together crapshacks.
Well, when the factories are shut down and are shipped to slave wage nations and automation reduces the need for office workers … what else could we expect?
As a neavo-Socialist, I would develop an economic program that incentivized manufacturing/engineering/building and fixing stuff, and tax/regulate the crap out of “money for nothing” industries like financials, and house flipping. The only reason house flipping is profitable, is because you don’t pay taxes on the capital gains. That’s a policy/regulatory decision.
Rants about Obama’s friends getting government money for solar development and electric cars aside, anyone who has looked at US history know the government has always helped develop and finance new technologies. Like aviation (see NACA and the DOD), and diesel-electric power (railroad locomotives……and WW-II diesel-electric submarines).
The trick is to develop policy based on merit, not on lobbying/bribes/kickbacks.
Of course, all this was back in the day when a bunch of the best/brightest from Yale, Harvard, and MIT had respected, full time “public service” jobs, instead of using their government job as a stepping stone into making millions telling your Wall Street/Hedge fund friends how to game the system
“Policy and regulatory decision”
Arrived at, after defacto bribery and lobbying by the financial industry
Ah, the fallacy of the market that levels off. No, when a large number of transactions are speculative, then nothing can be level. It is up or down. Never level.
Investors buying Vegas properties sight unseen for, ah-hemm, other investors, who have no say in management operations?
Anyone remember the Limited Partnership scams of the late 70’s and early 80’s?
Aside, talking to a realtor the other day, who reminisced on the “good old days,” back in 05 when a portfolio of Sub Prime notes could be sold instantly, at first sight, if it was packaged in a nice leather case wrapped with a gold ribbon. Didn’t matter what was inside.
Of course, now, the junk is sold directly to it’s end buyer, the Fed, instead of working it’s way there through the Re-Hypothication process, acing out the middlemen. And when the Fed owns it all, they have, for all intents and purposes, nationalized the US Housing market?
Ah, the efficiencies of the gumnut protection racket. Making America affordable at the expense of the taxpayer. What a feedback loop.
‘There has been a 96 percent increase in home prices from the trough of the recession until today in the San Francisco-Oakland area according to RealtyTrac. One type of buyer that is not jumping in with both feet is foreign buyers. With home prices spiking in San Francisco and foreign currency fluctuations playing parts, foreign buyers looking to pick up U.S. real estate as an investment have backed off — significantly in our area. Keller Williams Realty broker Kevin Kieffer told Thomson Reuters that purchases by foreign buyers in this area have dropped 30 percent in the past few months.’
‘That makes those tech buyers even more important to sustaining the strong San Francisco market.’
Wait, it gets better!
‘Earlier this year, Chris Benner searched online for a house priced between $275,000 and $375,000, looking from the San Fernando Valley south to San Pedro. “We came up with less than 10 matches that we would even think of looking at,” the 42-year-old freelance associate producer said.’
‘In April, he and his wife purchased a four-bedroom fixer-upper in Athens, an unincorporated area east of Hawthorne, for $297,000. The Benners make far more than the median household income — about $95,000 last year between them, Chris said — but it’s still tough. “We don’t save a penny,” he said. “For people only on one income — $50,000 or $60,000 — I don’t see how they can possibly do it.”
‘In working-class Watts, $280,000 will get you a three-bedroom house on Zamora Avenue. The home — built in 1944 — is 1,469 square feet, according to a Trulia listing. Photos with the advertisement show bars on the windows.’
The LA Times article has a slideshow. Click on “captions” under the photos and you can see what they are asking, including this Watts house!
That state is in deep deep sh*t. As are those who are there and anchored to debt service on a house.
‘Real-estate investment trusts posted negative returns in the third quarter and continued to trail the broader stock market, raising the prospect that the sector is losing its luster in the eyes of investors. The Dow Jones Equity All REIT Total Return index, which tracks 147 publicly traded REITs, delivered a total return of minus-2.7% in the July-September period, its worst performance since the third quarter of 2011.’
‘When borrowing costs rise, REITs get dinged twice: their cost of capital goes up, and their dividend payments become less appealing compared with other high-yielding investments. “There was a time when people were overly exuberant about how long interest rates were going to stay low. That time is gone,” said Jason Yablon, a portfolio manager with Cohen & Steers, one of the largest U.S. REIT investors.’
There are potential counter-points coming to play as well though with respect to REITs for those looking at longer-term trends. PLD put out a report recently titled “Entering the Sweet Spot for Logistics Real Estate”. They note how vacancy rates have fallen to less than 8% (a time when historically new property needs to be developed), and that current rents do not support new development.
With steady cap rates (ie. values, and likely steady interest rates), they expect rents to rise by 20-25% over the next 4 years. All else equal, an increase in their overall revenue by 25% would increase their free cash flow (and dividends) by about 50%, which will help offset investor demand for more yield.
If cap rates rise (likely because of higher interest rates), then the rents needed to justify new development would be even higher.
Also, the “cost of capital” that a lot of the REITs are exposed to is debt–many of those REITs have obtained fixed rate financing given the ultra-low current rates…the effect of higher interest rates won’t hit REITs immediately, but will occur over time (as cheap debt is renewed to more expensive debt).
If you look at some other reports that have come out (one by PREA, and one by TIAA-CREF), there are other interesting facts coming to play:
1. A TIAA CREF report titled “Cap rates rising: Fear and loathing in real estate” notes how on average a 1% increase in interest rates leads to approximately a 0.6% increase in cap rates. The reason is at least in part due to higher inflation being associated with higher interest rates over time, and real estate generally being a hedge against inflation;
2. A PREA report (their most recent “Compendium of Statistics” released on October 1), notes similar dynamics in more broad terms that PLD references. Namely that little is being built now, but that vacancy rates are falling…this is across the board with respect to commercial product types with the exception of apartments, which has experienced strong new construction levels. For instance:
Retail vacancies during the last bout of strong new development were in the 6% range. They went as high as 8% post-crash, and after hovering at around 8% for 2009-early 2011, have now dropped to about 7%, and are falling fastest most recently.
Industrial vacancies post-crash rose as high as about 10.5%, and are now at about 8%, and have been falling steadily for the past about 3 years. The last bit of strong development occurred when vacancies were in the approximately 7.5% to 8%.
Office looks like the worst, with vacancy still at 12% (down from about 13.5%), with development being strongest when vacancy rates were closer to 10%.
So, Industrial seems like the closest to new development (and if PLD is right about construction costs/current rent levels), and rental growth, Retail will follow shortly, and Office farther behind. Apartments already have rents that justify new development, but they are probably most vulnerable to higher interest rates, since their cap rates are so low.
Is Cohen and Steers wrong? Absolutely not, those guys are pretty damn smart. However, there are other factors at play (more with some product types than others) that can help offset the broader trends…if you are going to hold REITs at all, now may be a time to be a more selective holder of REITs than simply a broad basket.
The question in focus is “are the rent levels for the assets that the REITs hold likely to offset the negative headwinds of higher interest rates and higher yield expectations?”
Full disclosure: I hold PLD (but even more of other industrial REITs), and some retail REITs–in large part because office and apartments make me nervous…office because of weak long-term trends in demand, and apartments because they are very fully valued (in terms of both rents and cap rates).
With moratoriums in effect in all 50 states, of course vacancy rates have fallen some.
Nice post but I question the rental vacancy rates number. At least in my area - North Jersey - there is absolutely no shortage of rental properties. What is in short supply are good tenants able and willing to pay rent on time without destroying the place. And the are a lot of units coming online - both multi and SFH.
“Nice post but I question the rental vacancy rates number.”,/i>
You should question everything Rental Watch posts. He’s been caught in so many lies and misrepresentations we’ve lost count.
JimO:
I’m talking almost exclusively about non-residential property.
‘Real-estate investment trusts posted negative returns in the third quarter and continued to trail the broader stock market, raising the prospect that the sector is losing its luster in the eyes of investors.’
Would this be a good time to buy the dip in REITs?
the get rich quick schemes are back. This is the same story all over again.
D’ya mean the “real estate always goes up” story?
“The British know a thing or two about housing bubbles but still propagated a bubble in 2007 which peaked at 5.7 times income, with the subsequent crash once again exposing the weakness in the banking system. Have we learned? It would appear not! The current price to income ratio is 4.6, just shy of the late 80s peak and a worrying starting point for the traditional UK housing-led economic recovery, fed this time by mis-timed government incentives in the form of ‘Help to Buy’.”
We will all be able to buy them with our massive payrises
Average weekly earnings excluding bonus payments rose by 1.0% comparing May to July 2013 with the same period a year earlier. In cash terms, average weekly earnings excluding bonus payments were £447 in July 2013, before taxes and other deductions from gross pay; this is up from £443 a year earlier.
The average weekly wage, including bonus payments, rose by 1.1% comparing May to July 2013 with the same period a year earlier. At £474 in July 2013, average weekly wages including bonus payments were £3 higher when compared with July 2012.
http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/september-2013/sty-average-weekly-earnings.html
Still inflation isn’t a problem
The Consumer Prices Index (CPI) grew by 2.7% in the year to August 2013, down from 2.8% in July.
The largest contributions to the fall in the rate came from the transport (particularly motor fuels and air transport) and clothing sectors. These were partially offset by an upward contribution from furniture, household equipment & maintenance.
The other main inflation measures were unchanged between July and August: CPIH grew by 2.5% and RPIJ grew by 2.6%.
These latest numbers continue the trend of broadly steady inflation seen since spring 2012.
Our General Election is 7 May 2015, the politicians are trying to engineer a Housing Boom to make us all feel happier.
Red Cross to distribute food to Britain’s poor and hungry
Charity offering help to UK families for the first time in nearly 70 years, as food price rises and energy bills bite
Hard-up families could be forced to turn to the British Red Cross for help this winter for the first time in nearly 70 years, as thousands face crippling cuts to their household budgets.
The Red Cross said it was about to launch a campaign in supermarket foyers asking shoppers to donate food to be distributed to the most needy through the charity FareShare.
http://www.theguardian.com/uk-news/2013/oct/11/red-cross-to-distribute-food-to-britains-poor-and-hungry
Guy in my networking group is an EE that was involved on the Univac I. Great guy and his stories entertain all the EEs in the room.